The World Bank Energy Efficiency Plans In Developing Countries

Posted on May 21st, 2010 by

Energy efficiency is on the top of many people’s minds at The World Bank. 86% of all future energy needed will be coming from developing countries. Jas Singh, Senior Energy Efficiency Specialist for the Energy Sector Management Assistance Program (ESMAP) in The World Bank talks to us about the challenges developing countries face when trying to develop an energy efficient nation. According to Singh’s latest report, “Public Procurement of Energy Efficiency Services: Lessons from International Experience,” it is important to review the efforts made by developing countries when putting together a plan for third world countries and other developing nations. But he is clear to point out that every situation is different and it takes a lot of understanding of a specific country’s culture and personality to find the best solutions.

Full Transcription:

Ben Lack: Well, we’re here with Jas Singh, Senior Energy Efficiency Specialist for The World Bank, Energy Sector Management Assistance Program. Thanks so much for giving us some of your time.

Jas Singh: Pleasure to be here.

Ben Lack: Can we start by talking about what the program that you work for actually does?

Jas Singh: Sure. The Energy Sector Management Assistance Program, ESMAP, we are trust-funded which means mostly European governments provide support to us. And we basically provide information to our client countries on energy policy from the impact of the financial crisis on energy sector governments to energy security, renewable energy development, energy efficiency. So we do studies and reports, look at best practices and try to disseminate that out to many of our clients in the developing world.

Ben Lack: So I’m sure you’re working with lots of different companies and organizations in order to put together these types of studies. Talk to us about some of the most recent studies that you guys have done and how you got to the conclusions that you’ve made.

Jas Singh: Sure. One of the more important studies that we’ve done recently is on how governments procure energy efficiency services or ESCOs. From the procurement way, there’s a lot of challenges from allowing different types of solutions to be bid in, how to select the best value, how payments are based, how verifications of energy savings is done. And so we did quite a thorough global review of how different countries have approached these problems and how some of these experience in Europe and the U.S. and Japan can be adopted and adapted in countries such as China, India, and South Africa.

Ben Lack: I’m assuming that the U.S. and Japan and some of the European countries are some of the leaders in actually doing these things the right way. Give us some examples of why they are the leaders and what kind of knowledge transfer are you guys hoping connect with some of the other developing countries.

Jas Singh: Well, that’s absolutely right. The U.S. in particular has done far more than any other country in terms of energy efficiency in the public sector, using energy service companies and energy performance contracts. And the reason is because the government decided it was going to do it. And the government put in place the enabling environment, the legislation. They both required the public sector to be more efficient but also enabled them to do so. They provided the tools and resources. Similarly, in Germany and Japan have also put a lot of effort, not just in terms of money but also in terms of policy to create a conducive market for these types of problems, for these types of markets. The problem in developing countries is you often have very weak governments which even if they have good policies in place, the policies are not uniformly implemented or enforced. They don’t have the budgetary space to provide a lot of the subsidies, tax incentives, and other things you see in developed countries. And they have very underdeveloped markets. Not routine enforcement of contracts, difficulty getting to long-term financing. And so some of the models and approaches in North America and Europe are great, but they have to be adapted, simplified in order to work in many of the countries we work.

Ben Lack: I’m sure some of these developing countries are looking to you guys to help fund some of these initiatives as well.

Jas Singh: That’s exactly right. So ESMAP itself provides technical assistance, but we have been working with The World Bank to realize many of these. And in the public sector in particular, it’s a very nice marriage because we can provide the technical assistance, help figure how to structure this, and then The World Bank can come in and provide the financing. So if we have a captive public sector market and we have the financing, then it’s just a matter of finding the best implementation offers, whether it’s through utilities, whether it’s through ESCOs, whether it’s through some other market aggregator to figure out how to get these projects implemented.

Ben Lack: And is the financing typically done on a project-by-project basis or is there certain initiatives that your organization is currently working on that you know that you have this arm that could help fund whoever ends up coming to the table?

Jas Singh: We never fund project-by-project unless we’re talking about a huge urban development project which involves quite a few sectors or big transportation projects. So our normal mode is to put money into some sort of intermediary which then finances many small investments whether it’s through a bank, whether it’s through a municipal development fund, whether it’s through some other public revolving fund and fund many, many small projects. Depending on which country, then it’s up to the public sector to then tender out those projects, get private-sector bids. We work with them on figuring out a proper evaluation framework, good bidding documents, how this whole thing should work, where the financing comes from, who pays. And I think what a lot of the private sector like is that when The World Bank is financing one of these projects, although we’re not implementing it, we’re always looking over the shoulder. So we make sure that the procurements are done in a way that’s fair and transparent. We make sure the bidding documents are clear and easily understood. We make sure the information in there is credible, and I think that gives a lot of incentive for the private sector to bid because they know that these projects are going to be handled well.

Ben Lack: And obviously the finance arms are not going to fund a project unless you guys have helped put together a roadmap for how to implement these types of projects. So I’m curious to know, in the federal sector, what types of recommendations have you made to the United States for ways they can improve their energy efficiency.

Jas Singh: Well, The World Bank, unfortunately, doesn’t cover the developed world. We have done reviews of what they’ve done under the federal energy management program and other programs. And we routinely call upon some of them to present both to us, to inform us and also to our clients about what the U.S. does, what their experience has been, why they do some things and not do other things. But I think two of the areas that we have had a lot of interest from developing countries is, one, product procurement where the federal government requires purchase Energy Star equipment and the use of energy performance contracting which developing countries really, really like because it allows them to finance outside of their budget. And since they have such budget constraints, this is particularly attractive way to do it.

Ben Lack: Talk to us about why you’re at the conference today. You were helping one of the sessions, giving some insights on one of the sessions this morning. Talk to us about what the topic was and what you were bringing to the table as far as content.

Jas Singh: The topic for today was out of the scaling up the energy efficiency programs, particularly in the built environment. So I was presenting some of the findings from the public procurement of ESCO review that we just did. What gets covered a lot is the experience of the developed world which is extremely useful. It’s extremely important. But when we recognize that over the next twenty years, eighty-seven percent of the new energy demand will come from developing countries. The developing countries are going to play a much larger part of this energy demand than developed countries. The other thing is that in developed countries, you have extremely sophisticated public institutions. A very good governance systems, well funded, well staffed, a lot of technical capacity. We just don’t have that in a lot of our developing countries. And so while some of the programs in developed countries are quite technical, they might be complicated, they might have huge incentive schemes built in, we’re operating under much leaner circumstances in our developing countries. So what we wanted to share is some of the challenges the developing country can bring, but also some of the opportunities because they’re so much less efficient than the developed world. You’re talking about huge investment opportunities with much higher returns than in the U.S. and Europe. And then basically we just show “Here are the different options that we can bundle these.” And you already see in the developing world now… India just completed an assessment. They would like to bundle 159 municipalities, bundle that out of their single contract. So the advantage of the public sectors to be able because of common ownership, to really to be able to bundle a lot of facilities together and go at scale. We’ve never had that before because energy efficiency projects were so small. Doing a one-off didn’t make sense for the public sector and didn’t make sense for the private sector to bid on these opportunities. But with the bundling, I think this could have a huge benefit. And I think having done this report to eGlobal is a really good opportunity to engage with a very wide variety of participants, both in developed, developing world, resource institutions, funding organizations to just share our research, share what we’re currently thinking, what our experience has been and find ways we might able to partnership and collaborate with other organizations.

Ben Lack: Final question, and this is more of a personal question. I’m curious to know why you do what you do.

Jas Singh: Well, that’s a harder question to answer. I got into the development business being in the Peace Corps and finding that we’re very lucky to live in the world that we’re in. Having an Indian background and seeing that I’ve been able to live a much better life than a lot of my countrymen in India. Why I think energy efficiency is particularly interesting is it’s a natural blend of a few different themes. That we’re not asking people to pay more for a cleaner environment, particularly when the environment we have now is mostly due to the industrialized world. Energy efficiency pays for itself. It makes a lot of sense. It can help alleviate poverty. At the city level, we find that every time a city can create fiscal space from reducing our energy use, it means they could provide access to more people that don’t have access. To provide streetlights, portable water, simple transportation. And it’s also really good for the environment. And climate change is here. It’s here to stay. It’s a big issue. And energy efficiency is at least one of the easier things we can sell to developing countries because it’s both financially and environmentally sustainable.

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One Person has left comments on this post

» Sammi G. said: { May 22, 2010 - 06:05:20 }

I thought that was extremeley interesting. Thanks for the unusual post. I’ll keep checking back on this.

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